NewsHigh Court decision sounds warning to local territorial authorities over land information accuracy

The decision follows an eight day civil hearing held in October last year in which land owners Dave and Jillian Moorhouse were sued along with several other parties for failing to identify changes to water rights on a property under sale. 

“The decision sounds a warning to local authorities providing information on LIMs that if inaccurate or incomplete, may result in their liability for any loss a party suffers as a consequence on relying on the LIM,” Anderson Lloyd Partner, Frazer Barton, said. 

“This decision has significant ramifications for Councils.  All Councils will need to rigorously check changes arising from the issuing of any consent, certificate, or notice that affects the subject land and ensure their information is updated and accurate at all times.”, he said.

In 2004, the Moorhouses were selling the remainder of their Altimarloch Station to purchaser Warren McNabb having previously transferred all of their class B and half of their class A water rights in a 2002 sale. 

A 2004 property valuation had identified the correct water rights for the property but when further confirmation was sought by other parties, the details were disregarded in favour of those provided by Bayleys Real Estate and by the Marlborough District Council as part of its LIM.

The purchaser had sought damages from the Moorhouses and the Marlborough District Council and the Moorhouses sought to pass on any damages awarded against them to third parties Vining Realty Limited trading as Bayleys Real Estate and lawyers, Gascoigne Wicks.

Bayleys Real Estate was found to have incorrectly identified the water rights, their clients, the Moorhouses, were entitled to transfer in the sale to Mr McNabb and law firm Gascoigne Wicks acting for the Moorhouses also failed to correctly identify what water rights were being sold before approving the sale.  .

Justice Wild found that the Marlborough District Council acted both negligently and in breach of its statutory duty under section 44A LGOIMA by issuing a LIM containing erroneous information.

The court, in apportioning liability, assessed that the Council was 34% liable for the purchaser's loss which equated to $263,840.00 in monetary terms, although the Court has yet to determine the precise quantum to be awarded. 

“It will also be necessary for all Councils to now take steps to ensure that they are adequately insured against the risk of providing erroneous LIMs.”

The court found the Moorhouses liable, through their real estate agents and lawyers, for misrepresenting the status of the water permits, although the court noted that the Moorhouses themselves had done absolutely nothing wrong. 

The purchaser had made it clear to Bayleys Real Estate that its interest in the property was for a vineyard development and that the purchaser required sufficient water for that purpose.  The water rights were therefore held to be a material term of the contract. 

Both the real estate agent's representations and the Marlborough District Council's information on the A water rights were material factors in the purchaser confirming the agreement as unconditional.  It was noted that the purchaser's loss would have been avoided had the LIM accurately stated the position as to the A water rights. 

The court noted that the Council had a duty to keep the records of all water permits granted and transferred and importantly, the Marlborough District Council actually had records of the previous transfer on its file.  There was a need for the LIM to be complete and accurate.

Justice Wild found that the purchaser was not required to investigate beyond the information contained in the LIM and the court held that Bayleys ought to have included accurate and complete information about the water permits in its sales information brochure and carefully checked that information with the Moorhouses and their solicitors before issuing the brochure.

Lawyers, Gascoigne Wicks, institutionally knew that the vendors had transferred half of their A permit and all of their B permit in the previous sale despite the fact that two different solicitors had acted for the vendors on each sale.  Had the firm checked the position, the Moorhouses could not have confirmed the agreement and the sale would not have proceeded.

The court apportioned over half the liability to Bayleys, 34% to the Marlborough District Council and 13.2% to law firm Gascoigne Wicks.

Lawyers for all parties have now been requested by Justice Wild to provide further submissions to enable the Court to conclusively determine the purchaser's actual loss, but given the amounts involved and the fact that costs will be awarded to the successful purchaser it is likely that the Council's total liability for getting it wrong will be in excess of half a million dollars.

A full PDF analysis of this article, written by Malcolm Couling, is available for download below.